ELLIOTT WAVE

Viacom At Home

Spending an evening out at the movies enjoying a large screen and an entertaining movie, crunching popcorn, and sipping a Coke. Glad to be out, away from the kids and with friends. Those are the good times, but when times are tough, we sit at home in front of the TV, watching a rented movie, microwaving popcorn at a quarter of the price you pay for it at the cinema.

Viacom's (VIA) goal is to be the world's leading branded entertainment company across television, motion pictures, and digital media platforms, and their share price shows that they are doing quiet well, thank you.

Figure 1, a weekly chart, shows how the price moved up strongly from a low of $13.25 in November 2008 to a high of $64.23 by May 2011. My Elliott wave count suggests that at this level, a wave 5 has been completed, and that we should now expect an A-B-C correction taking the share to somewhere between $49.46-$53.35, the fourth wave of lesser degree. This correction is confirmed by the relative strength index (RSI), which is at an overbought level, and has given another sell signal. The price did break above the upward trendline when it rose to $64.23, but it has since fallen, possible to find support at the trendline, at approximately the $56.35 level.

Figure 2, a daily chart, shows that the wave count suggested by the weekly chart is correct, and is suggesting that the a-wave correction is possibly complete, with a b-wave up now on the cards. This is confirmed by the RSI, which is oversold, suggesting a buy signal is in the offing.

A Gann fan, shown on the chart, is suggesting that wave b could top approximately August 11, and wave c would bottom around about October 25.

The chart of Viacom shows how the share price moved up strongly over the past two and a half years. My Elliott wave count, however, is suggesting a strong ABC correction is happening. Short-term traders could profit from the b-wave correction. Long-term investors should wait until the price falls to the c-wave bottom.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.